Sell Complementary Products on My Site

Not affiltate relationship, or drop shipper

[ffctas]

Has anyone had experience selling complementary product lines on thier sites. I guess it would be kind of drop shipping, but not from a drop shipping service.
Specifically from a related product or service. Take a cut of profit but not full markup since the partner would be holding inventory. I would process order and be responsible for collecting payment, partner would be responsilbe for shipping.
Ideas of positives or negatives

[sun818]

Selling complementary products is a smart move for customer service and diversification. The issue you will run into, especially when selling complementary products, is having to pay for multiple shipping fees. When the customer orders product shipping from different locations, who is responsible for the extra charge? Your options will vary depending on how sophisticated your shopping cart is.

[Corey Bryant]

We have a client that we are actually implementing that idea right now with. The only thing I could say is with you collecting payment. If your MAP found out, they might think you are factoring which would more than likely be against your TOS with them. They could shut your account down and put you on a TMF list. It would be possible to get another merchant account, just very difficult.

-Corey

[sun818]

MAP? Merchant Account Processor? TMF? What is that? And would it be an issue to use a drop shipper with a merchant account?

[Corey Bryant]

MAP - is Merchant Account Provider. TMF is Terminated Merchant File. Sort of like a credit report for merchants.

You just need to be careful about accepting a credit card & the consumer is paying ABC, but the products are coming from XYZ. It is a very grey area - best might be to contact the MAP to make sure you would be compliant

-Corey

[beautykat]

How would this be different from a drop shipement? Correct me if I am wrong, in drop shipment, don't ABC have to receive payment and then send the order to XYZ to proceed with the shipment?

[Corey Bryant]

It really does not. But if the MAP is a stickler & your policies are not written properly, it could lead to disastrous results. As I said, it is a very grey area with the MAPs and the acquiring banks right now

-Corey

[sun818]

I don't see why it is. As long as you provide good customer service and don't raise any chargeback alarms, how would merchant account providers know or care?

[Corey Bryant]

Exactly - as long as your dropshippers are reliable & no alarms are raised, things shoud be fine. It is just a very grey area & most acquiring banks do not / cannot be associated with any IPSPs.

-Corey

[sun818]

There you go again with those acronyms... ;)

[Corey Bryant]

Well I have said IPSP before. most are familiar - guess it is the military part - it stands for Internet Payment Service Provider. But always feel free to ask when you don't know.

-Corey

[paulmc]

I am thinking of doing something similar, only in my case I was thinking of splitting the workload slightly differently.

I have a website selling product range A. Product range B would be very complementary and I'd love to stock and sell but it would require a massive commitment on my part in terms of stock and storeage costs. Instead, I propose creating a new department on my e-commerce site to promote product b. I am planning to split the profit with a bricks and mortar retailer of product B who currently has no e-commerce experience or expertese. He already buys and holds stock for his high street store. I generate incremental sales for him in return for a cut of the profit. The difference is that he takes the orders and ships the goods based on sales generated by me on my website. This way he gets to process the sales and pay me my commission at the end of each month. He makes far less profit because of my cut but these are 'incremental' sales which he would not otherwise have made.

This is my plan, will it work?

[otc_cmnn]

This is common practice. Why invest time and money building an inventory until you know you can sell a significant enough volume to justify the risk.

Do be careful with your merchant account though as Corey has pointed out. It is hard to get one in the first place and even harder once you have been given the boot.

Generally, don't tell your provider you are using a dropshipper, always act like your own this 'warehouse' you speak of. Try to avoid Post Auth until you know the goods have been shipped. This makes your provider happy and reduces chargebacks and refunds that are the dropshippers fault, but may set of alarms.

[paulmc]

Thanks
What I had in mind was not using my own merchant account for items appearing in this second totally separate department which I would be setting up to sell category B products. I figured the bricks and mortar retailer would use his existing merchant account. The retailer would purchase and stock the items. I would find the customers and direct the sales off my website directly to him. He would process the orders, including accepting payment via his merchant account and shipping. All orders placed via the website would be e-mailed to the retailer but I would get a copy too so once a month I could verify my commission earned. Sound viable?

[beautykat]

So, how does your customer place the orders? What if customer wants to buy both product A and B? Do they have to do it with separate shopping carts?

[paulmc]

Yes, seperate carts would be required, with one cart going to the retailer of product b. I think this should work because the 2 departmenst would be created in such a way that their physical identity would be very different (almost like 2 different websites) and the relationship would be clearly explained both on the website and in the cart area.

Anyone heard of anyone doing something similar?

[beautykat]

We have taken a different approach. All the items are still hosted on our site and customers will only have to purchase those products from one place. We then pass the order to our supplier for processing. Customers will be notified in our website that they might be receiving their order in separate shipments. Even Amazon does it the same way too!

[paulmc]

Hi BeautyKat
I agree - explaining that items may be shipped from different places should be no problem and customers expect it. Do you use one or two carts? This seems to be the hub of the issue. Do you process the payments for the goods you do not hold instock? Or, does the third party supplier ship to you and you foprward the goods? Legally who is the customer buying from - you or the third party?

[beautykat]

PaulMC,
From the customer point of view, its always better to have one seamless checkout process. We do this by having one shopping cart. Then send the order to the supplier to have them ship it out to the customer.

There is another partnership arrangement in which the supplier is willing to let the merchant store the goods, process the orders and have ship them out. The supplier in turn charge the merchant, minus profit sharing, at the end of the each month.

If your setup is going to be such that the customer pays through your website, then take advice from the previous post

"Generally, don't tell your provider you are using a dropshipper, always act like your own this 'warehouse' you speak of. Try to avoid Post Auth until you know the goods have been shipped. This makes your provider happy and reduces chargebacks and refunds that are the dropshippers fault, but may set of alarms."

[sun818]

Do not involve the customer in the details of your backend operations. Do let them know if an order is split and to expect multiple packages. Also inform them that there is no additional charge to them for the split order. This will preempt customer questions about where the rest of their order is.

[paulmc]

thanks fellas
seems like the best solution is to keep one cart and process payments oneself having first double checked availability with my third party supplier, not to tell the merchant account people what you are doing and to inform customers when 2 or more shipments will be needed.

[otc_cmnn]

Absolutely. Having two checkout points will DRAMATICALLY lower your conversion rates.

Like sun818 said "Don't involve your customers in your backend logistics"